This application relates generally to business methods for evaluating loans, and more particularly, to a system and method for providing a mortgage loan pricing model for various lending scenarios.
In general, loans are often classified as either a prime loan or a sub-prime loan. Sub-prime mortgage loans are loans which do not meet the criteria of the Federal National Mortgage Association and the Federal Home Mortgage Corporation (collectively, the “Agencies”) for purchase by the Agencies. Typically, sub-prime loans have one or more credit issues related to the borrower which the Agencies have determined would increase the probability of the loan payments on such loans not being made to the lender when due.
There is a market for sub-prime loans, however, through whole loan purchasers and ultimately, through investors in securities other than those issued by the Agencies. However, pricing of such loans in the past has been driven primarily by guesswork and competition.
It is desired to remove some of this guesswork and provide a reliable, fair, and consistent evaluation for all loans, including sub-prime loans.